Syrian-born Dahoud emerged as a target for Jurgen Klopp's side last summer, with The Guardian claiming at the time the Premier League side were willing to pay £25m ($30.8m) to sign the talented midfielder.

Gladbach were insistent the player would not leave this season, however, with his agent later clarifying the 21-year-old had already agreed to remain at the Bundesliga club until the summer of 2017.

Liverpool have been among a series of clubs to have continued monitoring the player this season but Dahoud has decided to remain in Germany with Dortmund, who continue to hoover up the best young talent on the continent.

"It was a very tough decision for Mo. It's a shame that we're losing a talent like him, but we have always managed to compensate for departures in the past," Gladbach sporting director Max Eberl told the club's official website.

Dahoud will leave Gladbach with just one year remaining on his contract. Bild report Dortmund will pay his release clause of €10m up front for the midfielder, plus future bonuses for domestic, European and national team successes.

Bild add Liverpool were still in the running to sign the player and were willing to pay more than his release clause demanded, a fee of €25m. However, Dahoud has chosen the opportunity to work under Thomas Tuchel instead of Klopp.

He will join a hugely promising group of players at the Westfalenstadion with the club's recent transfer policy seeing them focus on emerging talents.

In January, Dortmund signed 17-year-old striker Alexander Isak, beating Real Madrid to secure the Sweden international's signature. That followed moves for Emre Mor and Ousmane Dembele during last summer's transfer window.